Voters need clarity not rhetoric

Tony Abbott
may be unexpectedly dodging large puddles and soaking downpours as he does his tour of NSW and Queensland. But sudden rains are not going to stop the demands from farmers for greater Federal assistance after two years of drought.

Cabinet’s imminent decision to provide more – even if nowhere near as much as the Nationals have in mind – will require some verbal agility from Abbott and
Joe Hockey
. They will have to explain clearly why struggling farmers need help from government but struggling manufacturers don’t. And that’s before we get to the argument about how (rather than whether) the government can help
Qantas
deal with its many problems.

Hockey says the government is being dragged “kicking and screaming" on Qantas and won’t make a final determination until the airline announces its own results and strategy at the end of this month. But leaving Qantas to fly solo clearly is no longer part of the Canberra flight plan.

Not when the increasing uncertainty about the jobs market is one of the few obvious footholds for a Labor party trying to find some political traction.
Bill Shorten
spent the weekend launching the South Australian election campaign and focusing on the destruction of manufacturing jobs, especially at Holden.

But the latest Nielsen poll means Labor’s early confidence that it was inevitably gaining an edge on the Abbott government will now evaporate quicker than a summer mist. Instead, the attack on the Abbott government for “losing" the car industry seems to have only backfired on Labor and on Shorten rather than on the government.

It suggests Labor is continuing to make the same mistake. This is in underestimating Abbott while continuing to reassure itself that Labor doesn’t need to re-assess its own approach to politics and policy. That’s despite the evidence of the past several years.

The Nielsen poll indicates voters might still not much like Prime Minister Abbott but believe that he and his party are doing a better job of government than the alternative.

Even so, the rise in the unemployment rate to 6 per cent and the likelihood it will go still higher over coming months demonstrate the potential potency of this issue. The Prime Minister keeps saying that only a healthy economy and profitable businesses can ever really create jobs. But it’s obvious the government can do a lot to repair or to damage the national economic framework for business, affecting the willingness of the private sector to invest.

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Labor’s forecasts while still in government, for example, also had unemployment going up to 6.25 per cent this year. That’s hardly surprising given the virtual investment strike by business as most big business executives and small businesses lost faith that Labor knew what it was doing.

Yet voters still need to be persuaded that the Abbott government is helping to fix this problem rather than exacerbate it. It’s why ministers keep damning Labor for standing in the way. But the rhetoric needs to extend beyond this to embrace a coherently persuasive view of Australia’s future possibilities and growth.

That means the government must constantly link all its own actions – from (unsuccessfully) trying to abolish the carbon tax to introducing the royal commission on union financial misdeeds, to its determination to create a more efficient economy that will create decent, new jobs over time.

Unemployment up

How much time is still an open question. There’s been no employment growth in Australia for more than a year. The rate of full-time unemployment is now up to 6.4 per cent and the employment to population ratio is the lowest it’s been for a decade.

Unemployment is seen as following the economic trend rather than leading it. So the government is hoping other signs of life in terms of business confidence and a more vibrant housing market will eventually drag jobs along in their wake.

But as NAB’s chief economist,
Rob Henderson
, points out, the big slowdown in mining investment will be a “severe headwind" for the economy this year despite the volume of Australia’s commodity exports rising strongly. So much so that NAB is predicting a further rate cut from the Reserve Bank late this year.

That’s because, apart from the housing sector, there is no real sign yet of the necessary business investment taking place to make up for the withdrawal of resources investment. Instead, most Australian businesses – like consumers – are still cautiously sitting on cash and waiting to see how things play out. And that makes the spectre of rising unemployment a self-reinforcing confidence killer.

Warren Hogan
, ANZ’s chief economist, also points to the lack of any significant expansion of credit despite the surge in new mortgages. He doesn’t expect unemployment to go up significantly from here and thinks the “building blocks" are in place, given the rise in asset values and the strength of the housing market. But full time job creation is necessary for confidence, he says – which is why the latest rise in unemployment is making everyone a little more nervous.

Yet for all the angst about job losses following the announced closure of the Australian car manufacturing industry in 2016 and 2017, job creation in advanced economies like Australia’s has been primarily in services for decades. The services sector now accounts for close to 80 per cent of jobs and about the same percentage of GDP. That trend is not going to change – unlike political fashions and figures.